SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 30, 1997
COMMERCE GROUP CORP.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-7375 39-6050862
(Commission File Number) (IRS Employer Identification No.)
6001 North 91st Street, Milwaukee, Wisconsin 53225-1795
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 462-5310
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
3.3 Certificate of Designation for
Series A Convertible Pre-
ferred Stock.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
On January 30, 1997 the Registrant sold 1,500 shares of Series A
Convertible Preferred Stock for $1,500,000 under Regulation S. Sales commissions
of 12% were paid. The Registrant also sold an additional 1,000 shares of the
Series A Convertible Preferred Stock under Section 4(2) to U.S. purchasers. The
Series A Convertible Preferred Stock is convertible into common stock at the
lower of $2.90 per share or 65% of the closing bid price of the common stock
averaged over the five days prior to conversion. Upon notice of conversion by
the holder, at the option of the Registrant, the Registrant has the right to
redeem the Series A Convertible Preferred Stock at a price of $1,350 per share.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: February __, 1997 COMMERCE GROUP CORP.
By: /s/ Edward L. Machulak
Chairman and President
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CERTIFICATE OF DESIGNATION
Edward L. Machulak and Edward A. Machulak, certify that they are the
President and Secretary, respectively, of Commerce Group Corp., a Delaware
corporation (hereinafter referred to as the "Corporation" or the "Company");
that, pursuant to the Certificate of Incorporation, as amended, and Section 151
of the Delaware General Corporation Law, the Board of Directors of the
Corporation adopted the following resolutions on December 9, 1996; and that none
of the Series A Convertible Preferred Stock referred to in this Certificate of
Designation has been issued.
1. Creation of Series A Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 2,500 shares and designated as
the Series A Convertible Preferred Stock, having the voting powers, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
2. Dividend Provisions. The holders of shares of Series A Convertible
Preferred Stocks shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor, dividends
at a par with holders of Common Stock as if the Series A Convertible Preferred
Stock has been converted into Common Stock on the record date for the payment of
dividend. Dividends shall be waived with respect to any shares of Series A
Convertible Preferred Stock which are converted prior to any dividend payment
date. Each share of Series A Convertible Preferred Stock shall rank on a parity
with each other share of Series A Convertible Preferred Stock with respect to
dividends.
3. Redemption Provisions. Each share of the Series A Convertible
Preferred Stock is redeemable on the following manner, at a price of $1,350.00
per Share (the "Redemption Price"). The Corporation shall have the right to
redeem each Share within twenty-four hours after the Notice of Conversion (as
defined in Section 5(a)) is given by a Holder with respect to such Shares. The
Corporation shall effect such redemption by payment to the Holder by wire
transfer or certified check payable to the Holder on or before the Redemption
Date, which shall be the later of (i) the tenth calendar after the Notice of
Conversion or (ii) the date on which the Holder has delivered the certificates
representing the Preferred Stock proposed to be converted pursuant to Section
5(a)(1). In the event the Corporation shall not make such payment it shall be
deemed to have waived its right to redemption as to those Shares. The
Corporation shall have the right to redeem less than all of the Shares which are
the subject of the Notice of Conversion.
4. Liquidation Provisions. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the Series A
Convertible Preferred Stock shall be entitled to receive an amount equal to
$1,000.00 per share. After the full preferential liquidation amount has been
paid to, or determined and set apart for, all other series of Preferred Stock
hereafter authorized and issued, if any, the remaining assets of the Corporation
available for distribution to shareholders shall be distributed ratably to the
holders of the common stock. In the event the assets of the Corporation
available for distribution to its shareholders are insufficient to pay the full
preferential liquidation amount per share required to be paid the Corporation's
Series A Convertible Preferred Stock, the entire amount of assets of the
Corporation available for distribution to shareholders shall be paid up to their
respective full liquidation amounts first to the Series A Convertible Preferred
Stock, then to any other series of Preferred Stock hereafter authorized and
issued, all of which amounts shall be distributed ratably
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among holders of each such series of Preferred Stock, and the common stock shall
receive nothing. A reorganization or any other consolidation or merger of the
Corporation with or into any other corporation, or any other sale of all or
substantially all of the assets of the Corporation, shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 4, and the Series A Convertible Preferred Stock shall be entitled
only to (i) the right provided in any agreement or plan governing the
reorganization or other consolidation, merger or sale of assets transaction,
(ii) the rights contained in the Delaware General Corporation Law and (iii) the
rights contained in other Sections hereof.
5. Conversion Provisions. The holders of shares of Series A
Convertible Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(1) Each share of Series A Convertible Preferred
Stock (the "Preferred Shares") shall be convertible, at the
option of its holder, at any time after February 28, 1997,
into a number of shares of common stock of the Company at the
initial conversion rate (the "Conversion Rate") defined below.
The initial Conversion Rate, subject to the
adjustments described below, shall be a number of shares of
common stock (rounded to the nearest whole number) equal to
$1,000 divided by the lower of (i) Sixty Five Percent (65%) of
the Market Price of the common stock or (ii) $2.90, increased
proportionately for any reverse stock split and decreased
proportionately for any forward stock split or stock dividend.
For purposes of this Section 5(a)(1), Market Price shall be
the closing bid price of the common stock on the Conversion
Date, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") in either case,
or the closing bid price in the over-the-counter market if
other than NASDAQ, averaged over the five trading days prior
to the date of conversion.
The Holder shall notify the Corporation, by facsimile
notice to the Corporation at (414) 462-5312, copy by overnight
courier at 6001 North 91st Street, Milwaukee, Wisconsin
53225-1795 of the Holder's intent to convert (the "Notice of
Conversion") in the form attached as Exhibit A or Exhibit B
hereto, executed by the holder of the Preferred Share(s)
evidencing such holder's intention to convert these Preferred
Share(s) or a specified portion (as above provided) hereof,
and accompanied, if required by the Company, by proper
assignment hereof in blank. Such conversion shall be
effectuated by surrendering the Preferred Shares to be
converted (with a copy, by facsimile or courier, to the
Company) to the Company's registrar and transfer agent Nevada
Agency and Trust Company, 50 West Liberty Street, Suite 880,
Reno, Nevada 89501 ("Transfer Agent"). The date on which
notice of conversion (the "Conversion Date") is given shall be
the date on which the holder has delivered to the Company, by
facsimile or hand delivery, of the Notice of Conversion duly
executed to the Company. Unless the Company has duly redeemed
the Preferred Shares which are the subject of the Notice of
Conversion in accordance with Section 3 hereof, the Company
shall
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cause the Transfer Agent to complete the issuance of Common
Shares within five (5) calendar days of receipt of such
conversion form, provided that the Company or its agent has
received the Series A Convertible Preferred Stock certificates
which are the subject of the conversion on or prior to such
fifth calendar day.
(2) No less than 25 (or multiple thereof) shares of
Series A Convertible Preferred Stock may be converted at any
one time. No fractional shares of common stock shall be issued
upon conversion of the Series A Convertible Preferred Stock,
in lieu of fractional shares, the number of shares issuable
will be rounded to the nearest whole share.
(b) Adjustments to Conversion Rate.
(1) Reclassification, Exchange and Substitution. If
the common stock issuable on conversion of the Series A
Convertible Preferred Stock shall be changed into the same or
a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification,
reverse stock split or forward stock split or stock dividend
or otherwise (other than a subdivision or combination of
shares provided for above), the holders of the Series A
Convertible Preferred Stock shall, upon its conversion, be
entitled to receive, in lieu of the common stock which the
holders would have become entitled to receive but for such
change, a number of shares of such other class or classes of
stock that would have been subject to receipt by the holders
if they had exercised their rights of conversion of the Series
A Convertible Preferred Stock immediately before that change.
(2) Reorganizations, Mergers, Consolidations or Sale
of Assets. If at any time there shall be a capital
reorganization of the Corporation's common stock (other than a
subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section (b) or merger of
the Corporation into another corporation, or the sale of the
Corporation's properties and assets as, or substantially as,
an entirety to any other person), then, as a part of such
reorganization, merger or sale, lawful provision shall be made
so that the holders of the Series A Convertible Preferred
Stock shall thereafter be entitled to receive upon conversion
of the Series A Convertible Preferred Stock, the number of
shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from
such merger, to which holders of the common stock deliverable
upon conversion of the Series A Convertible Preferred Stock
would have been entitled on such capital reorganization,
merger or sale if the Series A Convertible Preferred Stock had
been converted immediately before that capital reorganization,
merger or sale to the end that the provisions of this
paragraph (b)(3) (including adjustment of the Conversion Rate
then in effect and number of shares purchasable upon
conversion of the Series A Convertible Preferred Stock) shall
be applicable after that event as nearly equivalently as may
be practicable.
(c) No Impairment. The Corporation will not, by
amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, transfer of
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assets, merger, dissolution, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all
times in good faith assist in the carrying out of all the provision of
this Section 5 and in the taking of all such action as may be necessary
or appropriate in order to protect the Conversion Rights of the holders
of the Series A Convertible Preferred Stock against impairment.
(d) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any shares of
Series A Convertible Preferred Stock, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series
A Convertible Preferred Stock effected thereby a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A
Convertible Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate at the time in effect, and
(iii) the number of shares of common stock and the amount, if any, of
other property which at the time would be received upon the conversion
of such holder's shares of Series A Convertible Preferred Stock.
(e) Notices of Record Date. In the event of the establishment
by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, the Corporation shall mail to each holder of Series A
Preferred Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution and the amount
and character of such dividend or distribution.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of common stock solely for the purpose
of effecting the conversion of the shares of the Series A Convertible
Preferred Stock such number of its shares of common stock as shall from
time to time be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock; and if at any time
the number of authorized but unissued shares of common stock shall not
be sufficient to effect the conversion of all then outstanding shares
of the Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of common stock to such number of shares
as shall be sufficient for such purpose.
(g) Notices. Any notices required by the provisions of this
Paragraph (e) to be given to the holders of shares of Series A
Convertible Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of
record at its address appearing on the books of the Corporation.
6. Voting Provisions. Except as otherwise expressly provided or
required by law,
the Series A Convertible Preferred Stock shall have no voting rights.
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IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series A Convertible Preferred Stock to be duly executed by its
President and attested to by its Secretary this ____ day of January, 1997.
COMMERCE GROUP CORP.
Edward L. Machulak, President
Edward A. Machulak, Secretary
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EXHIBIT A
CONVERSION CERTIFICATE
COMMERCE GROUP CORP.
Series A Convertible Preferred Stock
The undersigned holder ( the "Holder") is surrendering to Commerce
Group Corp., a Delaware corporation (the "Company"), one or more certificates
representing shares of Series A Convertible Preferred Stock of the Company (the
"Preferred Stock") in connection with the conversion of all or a portion of the
Preferred Stock into shares of Common Stock, $.10 par value per share, of the
Company (the "Common Stock") as set forth below.
1. The Holder understands that the Preferred Stock were issued by the
Company pursuant to the exemption from registration under the United States
Securities Act of 1933, as amended (the "Securities Act"), provided by
Regulation D promulgated thereunder.
2. The Holder represents and warrants that all offers and sales of the
Common Stock issued to the Holder upon such conversion of the Preferred Stock
shall be made (a) pursuant to an effective registration statement under the
Securities Act, (b) in compliance with Rule 144, or (c) pursuant to some other
exemption from registration.
Number of Shares of Preferred Stock being converted:
Applicable Conversion Price:
Number of Shares of Common Stock Issuable:
Date of conversion:
Delivery Instructions for certificates of Common Stock and for new
certificates representing any remaining shares of Preferred Stock:
NAME OF HOLDER:
(Signature of Holder)
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EXHIBIT B
CONVERSION CERTIFICATE
COMMERCE GROUP CORP.
Series A Convertible Preferred Stock
The undersigned holder ( the "Holder") is surrendering to Commerce
Group Corp., a Delaware corporation (the "Company"), one or more certificates
representing shares of Series A Convertible Preferred Stock of the Company (the
"Preferred Stock") in connection with the conversion of all or a portion of the
Preferred Stock into shares of Common Stock, $.10 par value per share, of the
Company (the "Common Stock") as set forth below.
1. The Holder understands that the Preferred Stock were issued by the
Company pursuant to the exemption from registration under the United States
Securities Act of 1933, as amended (the "Securities Act"), provided by
Regulation S thereunder ("Regulation S");
2. The Holder represents and warrants that either (a) the Holder is not
a "U.S. person," as defined in Regulation S or (b) the Holder is not the
original purchaser of the Preferred Stock being surrendered for conversion and
the Holder acquired the Preferred Stock in a transaction or under circumstances
exempt from registration under the Securities Act;
3. The Holder represents and warrants that all offers and sales of the
Common Stock issued to the Holder upon such conversion of the Preferred Stock
shall be made (a) pursuant to an effective registration statement under the
Securities Act, (b) in compliance with Regulation S, or (c) pursuant to an
exemption from registration; and
4. The undersigned has not engaged in any "directed selling
efforts" (as such term
is defined in Regulation S) with respect to the Preferred Stock or Common Stock.
Number of Shares of Preferred Stock being converted:
Applicable Conversion Price:
Number of Shares of Common Stock Issuable:
Date of conversion:
Delivery Instructions for certificates of Common Stock and for new
certificates representing any remaining shares of Preferred Stock:
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NAME OF HOLDER:
(Signature of Holder)
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